Lesson 23 pg. 68 - 70

Question 1

Describe how command economies determine wages for workers

Answer 1

In a command economy, the government sets the wages for all workers.

Question 2

Describe how free market economies determine wages for workers?

Answer 2

In a free market economy, the market determines how much workers are paid.

Question 3

Describe how mixed economies determine the wages for workers

Answer 3

In a mixed economy, at times, the market defines the wages, and in other circumstances, the government determines the wages paid to workers.

Question 4

What is the classic argument against minimum wage?

Answer 4

The classic argument against minimum wage is that if the wage is increased from equilibrium, the demand for workers decreases.
>For instance, some employees receive an increase in pay but may have their working hours reduced and benefits cut as their employers respond to keep their businesses viable.
>instead of a pay increase, the overall wages are reduced, and the worker may be forced to work two jobs to make up the loss in total pay.
>result is that total minimum-wage employment decreases and unemployment among minimum-wage earners increases.

Question 5

Describe the perspective of those in favor an increase in minimum wage

Answer 5

Their perspective: Minimum wage is not related to inflation but should automatically increase as the cost of living does.
>Higher wages would improve morale, increase retention of employees, and reduce hiring and training expenses for employers
>consumers with more income put more money back into economy, stimulating the economy
>more people would move out of the poverty level, reducing government welfare expenses
>a person cannot survive on wages paid at a minimum-wage job

Question 6

Define market value

Answer 6

market value - wage employers will pay and workers will accept in an open competitive market

Question 7

Define worker productivity

Answer 7

worker productivity - amount of goods and services that a worker produces in a given amount of time

Question 8

Define equilibrium wage

Answer 8

equilibrium wage - where the supply and demand curves intersect
*at equilibrium, there is no pressure for wages to rise or fall

Question 9

What happens to wages if the supply of workers decreases?

Answer 9

If the supply of the workers decreases, wages will increase, establishing a higher market value and a new equilibrium point

Question 10

What happens to the wages if there are too many workers?

Answer 10

If there are too many workers, workers will have to accept a lower wage and establish a new equilibrium point (a lower market value for wages).

Question 11

How could companies increase their productivity?

Answer 11

Companies may increase their productivity by automating the work that is being done by workers.